May 20 – Business as usual at FCA
In its proposed fees budget for 2020/21, the FCA has considered the effect of any fee increases on small firms and has moved to freeze minimum fees and defer the payment deadline for the fees of small and medium sized firms. However, it has not amended its total budget requirements in view of the pandemic and is expecting large firms to pick up the excess and pay promptly within the usual timescales.
Mortgage and protection firms and those reliant on estate agency are in a different situation to many of the firms that the FCA regulates. Whilst investment advisers will see their incomes fall for the next three to six months, these will continue. However, lockdown has seen most property completions put on hold, valuers are not able to go out to undertake valuations, removal companies are furloughed and house viewings have virtually ceased which means the pipeline of business for mortgage intermediaries has reduced significantly. This will take some time to rebuild once lockdown eases. The impact on firms’ incomes is felt almost immediately and for many months to come, with an expectation that firms will not be able to get back to normal business levels until Q1 2021.
Whilst networks are regarded as large firms by the FCA, they play the role of an aggregator and are a grouping of small firms. The decision of the FCA only to freeze the minimum fees will mean that AR firms sitting within networks will not benefit and their costs will increase in line with changes for large firms.
Whilst intermediary firms have been stripping back costs and furloughing staff there seems to be no indication from the FCA that they too are looking to reduce their costs. Whilst firms are wondering whether they will be able to pay their staff and fees and survive, the FCA has launched its advertising for next year’s apprenticeship programme.
The FCA transformation plan has been dropped into the proposals with a lack of detail and no cost benefit analysis. At a cost to fee payers of £30 million over the next three years, we would have expected some forecast of savings and efficiencies that this plan will generate.
In broad terms, fees for the smaller firm will be the same as last year for FCA, FOS and MAS with a slight fall in FSCS costs. For larger firms, their FCA costs will rise by about 5% due to increased turnover; their FOS costs might be up by around 30%, MAS and FSCS will be stable. Overall this will be an increase of around 8% in their total invoice on a best estimate basis.
Whilst FCA is exceptionally busy on Covid related changes being implemented across the whole sector and helping deliver the initiatives created by Treasury, this cannot be all of their staff. In my view, at this time they should be de-prioritising whole rafts of work and standing down staff. Until we see what is left of UK financial services, a thinned down, cheaper FCA is the imperative.
8 months ago / Comments Off on May 20 – Business as usual at FCA